The story starts with an guy insulting everyone on the IRC channel. Most people there believed it was rather funny, but it got even more funny. For information: The dangerous hacker is called bitchchecker and the one being hacked and original author of the comments, who is talking here, is known as Elch.
127.0.0.1 is always the IP-adress of the computer you’re currently using, any request there will return to your computer.
Link (some foul language)